Guyana's Fiscal Deficit Will Narrow In 2022 As Oil Sector Fuels Revenue Growth

  • Fitch Solutions forecasts that Guyana’s fiscal deficit will fall to 3.8% of GDP in 2022, from an estimated 4.9% in 2021, as rebounding economic activity and expanding output from the oil sector generated revenue growth of 21.2% y-o-y in H1 2021, outpacing the 16.5% growth in government expenditures during the same period. Fitch’s Oil & Gas team currently forecasts that the price of Brent crude oil will average USD82.0/barrel (/bbl) in 2022, up from USD71.0/bbl in 2021. Consequently, generating higher revenue intake of 50.2% in 2022, up from 25.2% in 2021, for the Guyanese government. 
  • In addition, several recently passed regulatory changes will likely bolster revenue from the non-oil sector. On January 3, 2022, the government approved the Guyana Natural Resource Fund (NRF) Act, which will integrate the oil sector with the non-oil economy by mandating that international oil companies source specific goods and services from domestic businesses. Such goods and services vary, ranging from environmental impact studies conducted before drilling to platform and steelwork used for constructing oil rigs. 
  • President Irfaan Ali’s government will increase expenditures by 41.0% in 2022 as it expands spending on public infrastructure projects and social services, such as the development of solar and hydroelectric farms and schools and health care facilities. On February 11, the government passed a GYD552.0Bn (approximately USD25.4Bn) budget for 2022, significantly larger than 2021’s GYD383.0Bn budget. The spending increases will be financed entirely by oil revenues, rather than tax increases on the Guyanese population. 
  • Public debt will likely peak at 38.4% of GDP in 2022 and then fall in the years thereafter as strong revenues persist and the government’s narrower fiscal deficits limit the issuance of new debt. Debt rose more rapidly from 2019 to 2021 as the government financed the fiscal deficits with additional bond issuances, pushing total public debt from GYD368.5bn in 2019 to GYD540.5Bn in 2020. However, in the medium term, narrower budget deficits and strong GDP growth will cause government debt to fall as a percentage of GDP.

(Source: Fitch Solutions)